20000413

SECP outlines

3-point agenda

for bourses

revamping

RECORDER REPORT

KARACHI: The Securities and Exchange Commission of Pakistan has announced a 3-point agenda for bourses to revamp the Registration Offices, develop the underwriting concept, build up retail demand for shares and educate the investors.

Addressing the members of the KSE Board of Directors, the Chairman of SECP, Khalid Mirza, said that in the new scenario, the stock exchanges could provide two basic services to retain their importance in the securities market development.

The first basic service relates to integrity of trade and ensuring appropriate disclosures, transparency and fairness in the stock market operations. He said that the second service would be assuring settlements of the trades on time.

He said that strengthening of SECP with investigating capacity would be on the top of the agenda and in this connection there was a need for revamping of the Registration Offices to make them service oriented and helpful to the investors.

Secondly, he stressed the need of developing the underwriting concept and capacity of the markets to contribute in the underwriting of public issues.

Thirdly, efforts could be made to build-up retail demand for shares and educating the investors.

He pointed out that we needed educated shareholders who can assess by themselves the risk and benefits involved in the stock market activity rather than assessing the market only on the basis of dividend payouts which, according to him should not be the criteria.

He urged upon the management of the KSE to also play its role towards educating the investors and help the SECP in this respect.

The SECP chairman also expressed the need of improving the auditing standards in the country which could also greatly benefit in attaining the corporate governance objectives. He said that there is also a need to provide hedge against risk and introduction of new instruments would greatly benefit to attain this objective.

Referring to the proposals given by the KSE chairman in his welcome address he assured that he will look into all the issues and fair decision in the larger insterest of the capital market development would be taken very shortly

Earlier, the KSE chairman Arif Habib, welcomed Khalid Mirza and complemented on his appointment as the Chairman of SECP. He recounted and appreciated his contribution in the development of the capital market in Pakistan, particularly in the establishment of central depository company in Pakistan besides introduction of assets management companies, investment banks, leasing companies etc. He hoped that in view of his international experience in the financial sector he would be able to improve the growth of the corporate sector in the country.

The chairman also narrated the progress made by the KSE in various areas of its operations including automated trading and growth in the daily transactions. He said that the KSE is already considering to further enhance the trading system in order to cope up with the increased daily trading which is expected to be completed by the end of this year. He also briefly explained introduction of various risk management measures which have provided comfort to the investors especially the financial institutions which are now playing major role in the daily trading.

Arif briefed about the future development targets of the KSE. He said that in order to give market quotations to all the investors efforts are under way to start real time market quotations through Internet by the end of this month. Similarly, the KSE is making all efforts to allow Internet routed trading this year for which negotiations with the vendors are under way. He said that in view of this KSE would need guidance from the SECP for implementation of the project. He also invited the attention of the SECP chairman about the draft take over law which is pending with government. He requested the SECP chairman to expedite its enactment as soon as possible. The KSE chairman, appreciated the efforts made by the officials of SECP in the area of corporate governance and observed that there is a need of its further improvement.

The KSE chairman invited the attention of the SECP towards some problems which need to be addressed by the Commission. He explained the rational of these proposals and requested the Chairman SECP to resolve these issues expeditiously:-

1. There is a need to carry out some amendments in the Capital Issues Rules in order to impose restriction of holding period of about 3-6 months in relation to the allotments made through pre-IPOs.

2. Early release of the balance amount of public subscription in the Capital Bank Limited which was paid by the investors in 1991 and has been withheld since then.

3. Release of the confiscated public subscription in the case of Commercial Union Insurance Company Limited in order to restore the confidence of the small investors in the new floatations.

4. Proposed reduction of the transaction charges by the CDC for which a request is pending with the SECP. This was necessary in the context of higher volume of trading, increase in the number of eligible securities and cash flow of the company.

5. Review of the directions of the SECP in the context of appointment of a government nominee as a Director on the Board of Directors on CDC and restricting the shareholding of the stock exchanges in the CDC.